Beginner’s Guide to Home Insurance

by Sharon Freeman

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A house constitutes the bulk of most people’s investments. It makes obvious sense then to insure it against loss, damage, and worst, destruction.

Home insurers usually sell two kinds of policies, one for the structure itself and another for contents. Some sell them separately, others jointly.

The second deal is becoming the norm because most policyholders do not want the hassle of approaching two companies when a catastrophe strikes both buildings and belongings.

Building Coverage

This is the heart of a home insurance policy for it covers the actual structure of the house. The coverage starts with the main building and out to the garage, gates, outhouses, pool, and so forth.

An ideal policy insures your house against damage wrought by the usual suspects: earthquake, fire, flood, severe weather, subsidence, theft, and vandalism. It should also cover home repairs, e.g. those for leaky taps, wall cracks, blocked drains—problems most homeowners don’t have a ready set of skills for.

Some insurance companies take exceptions with damage attendant on war and nuclear disaster, however.

Ideally, the insurer should cover your buildings at 100 percent of the value of rebuilding them in the event of utter destruction. A local builder or chartered surveyor can provide you an estimate. The important thing to remember is that the amount of the coverage should be the worth of rebuilding and not selling the house.

Policyholders can pay the premiums yearly or monthly. Most mortgages already carry a policy for buildings.

Contents Coverage

Contents coverage means an insurance policy for things you are likely to take if you transferred house, such as appliances, furniture and systems. It has been also standard practice for insurance companies to cover the replacement of locks if the keys are lost or stolen. Unauthorized swiping of your credit cards may also be covered.

A contents policy may also have ‘off-premises coverage’ or ‘all risks extension‘. This means that the company will cover the contents wherever they are. Thus, if you lost your tablet in a mugging while on holiday in Brazil, you can qualify for a claim.

In any case, coverage for replacing lost, stolen or destroyed belongings is usually set at half the worth of rebuilding your house. For example, if you have estimated your house would cost $300,000 to rebuild, then the contents would be covered for only $150,000.

It is very sound advice to jot down all the belongings under your roof to simplify the process of claiming. For the same reason, capture photos of valuables, and store them in safes or fireproof boxes.

If you have a cache of jewellery and high-priced pieces of art, it makes sense to buy a separate policy just for them.

Coverage for additional living expenses, personal liability

After an insured disaster strikes, an insurer can shoulder your expenditures while you are in transit to a new house. In other words, the insurer pays for your temporary lodging and food, e.g. hotel accommodations and restaurant dinners, among others. The coverage is usually limited to 20 percent of the building’s coverage.

In addition, most home policies today cover the damage you or your family may inflict on others’ properties. This part of the policy shoulders the cost of defending you in court should the aggrieved party litigate. People may also simply file a claim with your insurer if they were injured in your property. Personal liability policies usually cover you by at least $100,000.

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